New Options Strategy Quantitative Portfolio
(QP) is the Latest Solution to Emerge from Envestnet Affiliate
QRG's Systematic Approach to Investment Management
Advisors can Offer a Personalized Solution for
Mitigating the Risk of a Concentrated Stock Holding, While
Offsetting Capital Gains, Over Multiple Years
BERWYN,
Pa., Oct. 28, 2024 /PRNewswire/ -- Envestnet, a
leading provider of integrated technology, data intelligence and
wealth solutions—and also one of the largest direct index
separately managed account providers—has launched an Options
Strategy Quantitative Portfolio (QP) to address the market
volatility, tax risk, and liquidity risk associated with
concentrated stock positions, and to help advisors and their
clients unwind these positions.
"Envestnet is focused on delivering solutions that can be
customized to address any number of requirements within an
investor's portfolio," said Dana D'Auria, Co-Chief Investment
Officer and Group President of Envestnet Solutions. "This new
Options QP strategy, which will allow advisors to build better
portfolios around low-cost basis shares and other investment needs,
is a great addition to our suite of personalized
solutions."
Investors may find themselves with concentrated stock positions
for a number of reasons, such as an inheritance, a large stock
position granted by a company, shares from a business sale, or
simply loyalty to a long-term holding. This can expose them to loss
if the company underperforms and its stock drops. For investors
holding a concentrated position in less liquid or closely held
stocks, sometimes selling the position without moving the market or
finding buyers can be difficult when trying to exit the position.
Furthermore, selling a concentrated position in a stock that has
seen strong appreciation may trigger significant taxes.
Consequently, many investors will delay or avoid selling to defer
taxes leading to a prolonged concentrated position, further
exacerbating the risk.
Developed by Envestnet's quantitative asset management unit, QRG
Capital Management, Inc. (QRG), the new strategy offers investors
three options-based hedging solutions that can help generate income
from and/or mitigate the risk of a concentrated position while
spreading out taxable gains over a multi-year time span. More
information about the Options Strategy QP is available at
https://www.envestnet.com/qrg/strategies/options.
"In keeping with Envestnet's ongoing commitment to innovation
and addressing investor needs, we have created a broad, scalable
solution which can be customized to help individual investors
optimize the income from concentrated stock positions," said
Brandon Thomas, Co-Founder and
Co-Chief Investment Officer of Envestnet. "The Options Strategy
QP is underpinned by the robust, quantitative methodology and
dedicated support the industry has come to expect from us—and is
designed to help advisors and their clients take advantage of
options-based strategies on their terms, in ways that they are most
comfortable pursuing."
A Customizable Options Strategy
Options are derivative securities where a buyer agrees to pay a
premium to the seller for the right to buy or sell the securities
at a specific price within a certain timeframe. The seller then
collects a premium for granting the buyer the right to sell the
security for them.
Financial advisors that utilize the Options Strategy QP can fill
out a personalized digital survey, built into the Envestnet
platform, which asks questions designed to help them understand and
feel comfortable with this type of complex strategy. The
information provided by clients in the questionnaire can help them
work together with their advisors to identify the best approach
within the Options Strategy QP:
- Covered Calls—Call options enable the buyer of the
option to buy the underlying asset at the strike price of the
option by the expiration date, and require the seller of the option
to sell that underlying asset. Covered calls entail selling call
options to cover an investor's shares of the existing stock
position, in order to generate more income and mitigate downside
risk.
- Protective Puts—Put options allow the option buyer to
sell the underlying asset at the option's strike price by the
expiration date, and require the option seller to buy the
underlying asset. A protective put strategy involves two
positions—the long-put option and shares of the underlying stock.
The profit from the put option can directly offset the decline of
the stock price below the strike price when the option expires.
Crucially, the Options Strategy QP's protective put approach can be
customized by investors and their advisors by desired downside
protection, number of shares to hedge, and the projection's time
horizon.
- Collar Strategies—These approaches, which involve buying
a put and selling a call on the shares of the underlying stock, are
designed to deliver downside protection at a lower cost by
financing the purchase of put options with income generated from
call options. The QRG collar strategy within the Options Strategy
QP adheres to the client's desired risk tolerance while generating
income in a customizable way.
"Our rules-based process is key to helping high-net-worth
investors potentially increase returns from concentrated stock
holdings through strategic liquidation, while reducing risk and
offsetting taxable gains," said Hunter Willis, CFA, Portfolio Manager for
Envestnet's Quantitative Research Group. "We don't just
accept the outcome of a position—we look to optimize returns by
utilizing stock-specific inputs designed to capture the volatility
risk premium in each stock option."
The QRG suite of QPs is designed to combine the benefits of beta
investing with the portfolio customization of managed accounts.
Envestnet offers Market Series, Factor-Enhanced, Sustainable, and
Fixed Income QPs to help investors strengthen after-tax and
risk-adjusted outcomes in a cost-effective manner. Envestnet's
suite of QPs has generated annual growth of 40 percent in accounts
and advisors over the past three years. First introduced in 2013,
the QRG QP offering consisted of more than $12 billion in assets under management or
administration as of the second quarter of 2024. To learn more,
please visit https://www.envestnet.com/qrg/strategies.
About Envestnet
Envestnet is helping to lead the
growth of wealth managers and transforming the way financial advice
is delivered through its ecosystem of connected technology,
advanced insights, and comprehensive solutions—backed by
industry-leading service and support. Serving the wealth management
industry for 25 years with more than $6.2
trillion in platform assets—more than 110,000 advisors, 17
of the 20 largest U.S. banks, 48 of the 50 largest wealth
management and brokerage firms, more than 500 of the largest
RIAs—thousands of companies, depend on Envestnet technology and
services to help drive business growth and productivity, and better
outcomes for their clients. Data as of 6/30/24.
Envestnet refers to the family of operating subsidiaries of the
public holding company, Envestnet, Inc. (NYSE: ENV). For a deeper
dive into how Envestnet is shaping the future of financial advice,
visit www.envestnet.com. Stay connected with us for the latest
updates and insights on LinkedIn and X (@ENVintel).
Disclosure
Nothing contained in this document is intended to constitute
legal, tax, securities, or investment advice, nor an opinion
regarding the appropriateness of any investment, nor a solicitation
of any type. Investing carries certain risks and there is no
assurance that investing in accordance with the portfolios or
strategies mentioned will provide positive performance over any
period of time. Investors could lose money if they invest in
accordance with the portfolios or strategies discussed
herein. Past performance is not indicative of future
results.
Option trading involves a significant degree of risk, which each
prospective investor should seriously consider. The risk of loss in
trading options can be substantial and options are not suitable for
all investors. Prospective clients should carefully consider
whether such trading is suitable for them in light
of their financial condition and individual risk tolerances.
The high degree of leverage that is often obtainable in options
trading can work against investors as well as for them. More
information on the risks of buying and selling options contracts
can be found on the CBOE's website at
https://www.theocc.com/company-information/documents-and-archives/publications
MEDIA CONTACTS:
Amy Norcini
Envestnet
amy.norcini@envestnet.com
Andrew Jennings | JConnelly for
Envestnet
envestnetpr@jconnelly.com
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SOURCE Envestnet, Inc.
